Great Lakes Wire

ESG stands for Environmental, Social, and Governance. These are policies that companies are being asked to adopt as “strategic frameworks that guide businesses in managing their environmental footprint, fostering social responsibility, and upholding strong governance practices.”

While Environmental and Governance policies have not yet significantly penetrated employee handbooks, new Social policies are emerging for consideration. According to ESG Voices, a group advocating for ESG, “Social policies focus on the company’s relationship with employees, suppliers, customers, and communities where it operates.” Companies increasingly require their vendors to have these policies in place.

These social policies include labor standards, employee health and safety, diversity and inclusion, and community engagement. Specific individual policies that employers may now need to include in their handbooks are:

- Human Rights

- Policies against Forced or Compulsory Labor

- Child Labor

- Human Trafficking

- Health & Safety Policy

- Diversity Equity and Inclusion

- Pay Equity and Pay Transparency

- Privacy of Personal Data

- Anti-Discrimination and Anti-Harassment Policies

A policy statement on Anti-bribery and Anti-corruption is also entering the realm of employee handbook topics under the Governance area of ESG.

Though these policies may appear similar across companies, ESG Voices recommends organizations customize them based on their specific “industry risks, operational impacts, stakeholder expectations and strategic goals.” For instance, an employer might not support labor unionization or may choose to invest less in diversity equity and inclusion. Tailoring those policies accordingly is advised.

To develop effective ESG policies customized to an organization’s needs, it is recommended to set clear objectives; identify relevant metrics; create an implementation framework; establish monitoring procedures; ensure accountability; track progress; and communicate the policies effectively. This includes incorporating relevant policies into the organization’s employee handbook.

Recent discussions with HR professionals indicate that requests for including these policies often come from operations or procurement departments based on customer purchase agreements. In some cases, directives originate from top management or the Board of Directors.

It is advisable for Human Resources departments to proactively suggest management consider adopting these new policy trends for inclusion in the organization's employee handbook.

ASE Connect offers an in-person class titled "Designing and Updating Employee Handbooks," which will be held in Novi on September 18, 2024. Participants will receive instruction on critical legal compliance components as well as standard and optional handbook policies. ASE also provides services for reviewing or developing customized employee handbooks.

Sources: ESG Voices - Understanding ESG Policies: A Comprehensive Guide for Businesses (April 12, 2024), Morrison & Foerster LLP - ESG’s Ever Expanding “S” (August 15, 2024).

By Michael Burns